In this series of posts, we discuss the role of Product Manager in defining, documenting and communicating market opportunities – in particular answering five key questions about your proposed product…
In this post, we focus on the purpose of Competitive Analysis to extend your understanding of your target customer, their needs and how well they are being served.
If your company is an incumbent in a market, competitive intelligence serves to defend against threats, keeping you focused on maintaining and increasing your unique advantages over other solutions. If yours is a smaller company that’s new to or yet to establish itself in the market, it helps you identify where incumbents fail to serve and satisfy customers – that could be your opportunity to be disruptive.
There are three key advantages in conducting competitor analysis:
1. Identify and benchmark your customer’s choices – Monitor relative customer satisfaction levels to indicate the likelihood of switching. Test competitor products with your own users and your competitors’ users, to learn what they do and don’t like about each one, and to uncover hidden usability issues or functionality gaps in your own solution.
When competitors invest in new functionality, technologies, or in entering new markets, it indicates potential growth opportunities or better ideas to solve customer problems. If you can get competitor business and product performance data, you will have excellent benchmarks for your metrics and targets. You will also be able to focus on areas of weakest product performance, and the data will help in prioritizing new features.
2. Position yourself in the market – Your differentiators are key to establishing your market position relative to your competitors. But you should also be aware of any differences in how you and your competitors view your target market and its needs. By reading, interviewing and other research, you can discover how competitors talk to their customers and how they position themselves relative to other options, including yours. Where your solution is stronger or weaker, clarify your own positioning.
3. Prepare your Marketing and Sales teams – Your positioning and a summary of competitor strengths and weaknesses will help your product marketing team develop impactful messaging. At the same time, you avoid drawing attention to any problems within your solution.
Commonly in Enterprise organizations, you will be expected to provide Sales materials for training and for objection handling. This is essential because customers often directly compare several similar offerings in their evaluation process.
Having competitors is a good thing. Here are some reasons why:
- Market Validation: Having competitors validates that the problem is worth solving. If you don’t have any competitors, you need to ask yourself a tough question: Am I working on a meaningful problem?
- Customer Interest: Competitors provide you with clues. They can help you find attractive markets or customers, and develop successful marketing strategies.
- Benchmark KPIs: You might be able to benchmark performance and compare estimated business metrics. If a competitor has better customer retention than you, for example, then find out why.
- Efficient Operations: Competitors can provide insight into more effective or cheaper marketing, operational or distribution models.
- Investment: Competitors might be spending a lot more or a lot less than you on, for instance, engineering, sales, marketing, customer service and support? Why and what are the implications for you?
- User Testing: You can test competitor products with your customers to learn where your product’s usability is better or worse.
- Execution Insights: Competitors might have advantages or challenges internally with their culture, decision making, or speed of delivery. How do you replicate the advantages, and avoid the disadvantages?
- Sense of Urgency: Psychologically, competitors provide a target for a team to band together and focus on winning – creating a sense of purpose and urgency.
Your organization may have a competitive intelligence gathering function, often conducted by a business strategy or corporate development group. But don’t rely solely on them. You are likely, as Product Manager, to be the one most focused on understanding your competitor’s products with respect to your own. You will have a unique customer-centric view of competitors.
In this post you can find a detailed overview of competitor analysis frameworks.
Competitors and Alternatives Best Practices
Define a broad competitive set. New entrants, players in adjacent geographic or industry markets, solutions on different technology platforms, and even non-technology based solutions – they are not always obvious, yet can be potential threats.
Maintain a healthy respect for competitors but your primary interest is to serve your customers. Competitive analysis is useful only if actionable, so focus only on useful information that can may influence your product direction.
1. Define your competitive set broadly – look for alternatives too
Uber and Lyft are direct competitors with similar technology platforms and end-user services. They both enable easy access to transport through a mobile application. However, that’s not the problem they are solving; that’s their solution.
The problem they are solving is getting people from A to B affordably, safely, and conveniently. That means they are also in competition with taxis, private cars, public transportation, biking, car pools, and even walking. Both have also realized that the emerging technology of self-driving cars is a huge threat, and have taken steps to incorporate it into their strategy. The same cannot be said for the taxi industry.
Alternatives can be created from dramatically different technology, or without using technology at all. Customers don’t care how you solve their problem so long as you solve it and do so efficiently.
Take, for example, our example (below) of a proposed mobile application to gamify fitness goals – “Track and Slash”. In initial analysis, the company only compared its product with other mobile applications in the cross-over space of games and fitness. Realizing later they had overly limited scope, they included non-technology solutions in their evaluation, along with games that happened to have a side-benefit of improving fitness.
2. Don’t dismiss competitors too easily (or take them too seriously)
Strike a balance. You don’t want to be ignorant of nor arrogant towards competitors. But neither should you react with concern every time they make an unexpected turn. Some industry leaders claim to ignore competitors entirely, focusing only on their own innovations and customer needs. And they rightfully deserve praise for their success. But if you have a superior solution, or are the market leader, modesty is wiser.
Don’t put your competitive position at risk – keep tabs on how your competitor landscape is evolving. You might find that a competitor is nibbling away at a lucrative niche market, attracting loyal customers they can leverage to move aggressively into your market. Or perhaps new entrants are developing innovations that could be disruptive. While this may or may not be a problem, it’s always best to reduce the likelihood you might be surprised.
At the other extreme, do not get caught up in time-consuming, exhaustive analysis. Do not allow competitor activities to distract you from your core purpose – to keep existing customers happy and attract new customers.
If you discover a new competitor, learn from them and observe how they address customer needs. Don’t react with panic or denial if an existing competitor announces an unexpected initiative or appears to threaten your direction. Observe trends, but engage stakeholders and customers before taking considered action. Competitive analysis informs your understanding of the customer and provides team motivation but it should not dictate your vision or roadmap.
Chase your vision – not competitors.
3. Make analysis actionable (a feature-parity matrix is not competitor analysis)
Use hypotheses-driven approaches and be clear on what you will do based on the outcomes. Stick to a couple of key recommendations.
A competitor analysis is not a feature-parity matrix, showing a side-by-side comparison of who-has-what features. All this does is to promote the idea that having more features equates to a stronger service (all you have to do is “keep up” or “catch up”). Such thinking can distract you from working on the key initiatives that your customers really need. Serve your customers well. If they are happy then they have little reason to leave you, and won’t just over a few features. Instead, understand your competitors’ strategy, target market, value proposition, and differentiators – and use that to inform but not dictate your decisions.
Remember, imitation is the highest form of flattery. Don’t flatter your competitors too much.
“You should learn from your competitor, but never copy. Copy and you die” – Jack Ma
War story – Feature Parity Is Not A Goal
A mobile social networking client was in discussions with a new investor over competitor disparities. The investor worried that the client was behind in one of their key markets (China) and asked for an evaluation of side-by-side feature comparison between their product and those of competitors.
The most useful outcome of the exercise was my getting to know the competitor’s products much more intimately. However, the result – a three-page spreadsheet that included mind-numbing detail – wasn’t very helpful.
Instead, I asked myself what were the strengths of our product in comparison to theirs, and where were their opportunities.
We knew we had fewer features – that had been deliberate, keeping the product to a single purpose and elegantly simple. Too many features led to clutter. Counter-intuitively, far from being “behind”, the analysis highlighted a lack of features had made our product more effective and easier to use.
However, one insight did stand out. Several competitors had introduced an innovative live “TV-style” broadcast video function. Further research indicated this might be an opportunity in the Chinese market – one which could create higher engagement and revenue potential.